Which Business Model of Amazon is Best for Investment - In Continuity with "Private Label"
Junaid Iqbal
Amazon E-Commerce Strategist ll Facebook II LinkedIn Il Wholesale ll Arbitrage ll Private Label II Product Research II Competitor Analysis II Sourcing II PPC & Optimization II Brand Approval ll Buy Box Strategies ll
Which Business Model of Amazon is Best for Investment - In Continuity with "Private Label"
There are some other popular Amazon business models other than “Private Label” sellers use to sell products on the platform that effectively generate revenue.
ü Wholesale
ü Retail Arbitrage
ü Online Arbitrage
ü Dropshipping
ü Hand made
1- Wholesale:-
This involves sellers investing in large volumes of products directly from suppliers at low-cost or discount in bulk and selling these as individual units in a retail marketplace on Amazon for a higher price. Often, the wholesale products already have listings created on Amazon. Buying in bulk allows you to get hold of potentially high-value items but at low prices, allowing you to maintain a high-profit margin for every sale you make.
47% of wholesalers spent less than $8,000 to get started selling on Amazon. 61% of wholesalers earn more than $3,000 per month selling on Amazon. 58% of wholesalers have profit margins of less than 20%. 47% of wholesalers took six weeks or less to start selling on Amazon. Nearly half of the wholesalers (49%) spend over 20 hours on their businesses each week, and 18% spend over 40 hours each week.
In many ways, wholesale functions like arbitrage. First, the wholesaler must find a supplier or source for products and purchase the goods. Once the goods are purchased, they list the individual products on Amazon. The top 5 most popular categories for wholesalers to sell in are:
What Challenges Do Wholesale Sellers Face On Amazon?
2- Retail Arbitrage:-
Retail Arbitrage is a method of finding low-cost or discount goods in brick-and-mortar retail stores in order to resell online. The profits that retail arbitrage sellers on Amazon earn is the difference between the price for which they can sell the product on Amazon minus Amazon's fees and the original cost of the product. 49% of retail arbitrage sellers spend less than $1,000 to get started selling on Amazon, with one in three saying they spent less than $500. Retail arbitrage is the least expensive way to start. While retail arbitrage is the least expensive way to get started selling on Amazon, it is also among the least profitable. 62% of retail arbitrage sellers earn less than $2,000 per month on Amazon, and 25% earn less than $500.
41% of retail arbitrage sellers told us that it takes six weeks or less to get started selling, making it one of the fastest Amazon business models when it comes to getting up and running. 60% of retail arbitrage sellers spend up to 20 hours per week working on their business, and 25% spend less than four hours each week. That includes looking for products, building listings, and shipping goods. The top 5 most popular categories for retail arbitrage sellers to sell in are:
Retail arbitrage is perhaps the easiest method to sell products on Amazon. All one has to do is first find products to sell in brick-and-mortar stores, and then list those products on Amazon. In addition to finding products and managing inventory, retail arbitrage sellers cited the following challenges:
3- Online Arbitrage:-
This Amazon business model is largely the same as retail arbitrage, except it's all done online. It involves scouring the internet and buying reduced or cheap products from eCommerce marketplaces that you know you will be able to sell for a higher price on Amazon. Like retail arbitrage, the profits online arbitrage sellers on Amazon earn is the difference between the price for which they can sell the product on Amazon minus Amazon's fees and the original cost of the product. 58% of online arbitrage sellers spent less than $2,500 to start selling products on Amazon, and 29% started with less than $500.
55% of online arbitrage sellers earn less than $3,000 per month selling on Amazon. However, 16% earn at least $1,000 to $5,000. 54% of online arbitrage sellers see profit margins of 16% or higher.
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Online arbitrage sellers are able to start selling rather quickly. 36% of online arbitrage sellers took less than six weeks to get started on Amazon. 68% were about to get their businesses up and running within 3 months or less. 56% of online arbitrage sellers spend less than 20 hours per week on their Amazon businesses. The top 5 most popular categories for online arbitrage sellers to sell in are:
Like retail arbitrage, selling online arbitrage on Amazon is relatively simple. First, you must find a product on another website (such as eBay, Etsy, Walmart.com, etc.) and purchase the product. Then, you list the product on Amazon.
What Challenges Do Online Arbitrage Sellers Face On Amazon?
4- Dropshipping:-
If you find reliable and reputable suppliers, drop-shipping can be a great success for those looking for hassle-free Amazon selling. Drop shipping is a business model where an Amazon seller does not keep their own product inventory, but instead, transfers their customers’ orders directly to the manufacturer or supplier. 50% of drop shippers informed us that they spent less than $2,500 to start selling on Amazon, with 17% spending $500 or less. 39% of drop shippers earn $5,000 or less drop shipping products on Amazon with 48% seeing profit margins between 11-25%.
On average, drop shippers take longer to get started on Amazon, with 56% telling us that it took longer than six weeks. Additionally, 10% stated it took over a year to get started. Drop shippers also spend more time working on their businesses than other Amazon sellers. 54% of drop shippers spend over 20 hours per week on their Amazon businesses. Nearly one in four drop shippers spent over 40 hours per week. The top 5 most popular categories for drop shippers to sell in are:
Drop shipping requires a little more setup than some of the other Amazon business models (although, it’s not as extensive as a private label). For more details on drop shipping, we have an entire article that covers this method. Here are the basics.
What Challenges Do Drop shippers Face On Amazon?
5- Handmade:-
Amazon's handmade sellers are people who create their own products (“by hand”) to sell on the Amazon marketplace. Examples include jewelry, accessories, home decor, and more. 53% of Amazon handmade sellers spent less than $2,500 to start selling on Amazon. Out of all business models, handmade is among one of the least costly at startup. 50% of Amazon Handmade sellers earn less than $5,000 per month selling goods on Amazon. And 30% earn less than $1,000 per month, making handmade among the least profitable methods of selling on Amazon behind retail and online arbitrage. However, handmade sellers have better margins on average, with 52% earning profit margins between 11-25%.
It took less than three months to get started, with more than 43% taking less than six weeks. However, it took 40% of handmade sellers three months to a year before their Amazon business was profitable. 37% of handmade sellers spend more than 20 hours per week working on their Amazon businesses, and 20% spend more than 40 hours per week. Selling handmade on Amazon requires handmade sellers to create listings for the products that they are offering. Then, once a sale is made, they must create and/or fulfill the handmade product.
What Challenges Do Handmade Sellers Face On Amazon?
How Can You (INVESTOR) Choose an Amazon Business Model?
There are several key factors to consider when weighing up your options and deciding on the best Amazon business model for you:
Recommendations:-
All in all, third-party selling is about identifying the pros and cons of each Amazon business model and being realistic about how much time and money you have to invest. Once you have decided on the best strategy for you, stick to it. By being committed to a business model long term you are sure to see results from selling on Amazon.